A federal government shutdown may only seem like a problem for lawmakers – but it could quickly become a problem for buyers of new-construction homes, too.
Even if builders keep working and lenders keep lending, key parts of the mortgage pipeline depend on federal systems and agencies. If those go dark, your closing could stall, even if everything else was on track.
How a Shutdown Interferes with Homebuying
Several behind-the-scenes steps in a mortgage closing may rely on federal offices:
IRS income verification. Lenders often require tax transcripts (Form 4506-T) to confirm your income. If the IRS stops processing requests, your loan could be stuck. However, Brad Neal, mortgage loan officer for UFCU, says, “There could be a delay with 4506-T forms, but the process has become more streamlined, so this may not be an issue, or it may be minimal.”
FHA, VA, and USDA loans. Unlike loans from banks, credit unions, or other private lenders, FHA, VA, and USDA loans rely on federal staff for case numbers, underwriting approval, and loan guarantees. In past shutdowns, many of these programs slowed to a crawl. “These types of loans actually can be closed during a government shutdown, unless we need a special review or need to contact HUD,” says Neal. "So there’s a possibility of impact, but not necessarily.” According to the NAR, the USDA will stop issuing new direct and guaranteed home loans, and any scheduled direct-loan closings will be delayed. Guaranteed loans already under review may still move forward, but closings without a final guarantee will proceed solely at the lender’s risk. Existing USDA construction loans may receive funds only when necessary to protect the agency’s interests, and all pending servicing actions will be paused and documented until operations resume. The Department of Veterans affair will continue to guarantee home loans, but approvals may slow, and the FHA will keep endorsing new single-family mortgage loans, with some exceptions (such as Title I loans).
Flood insurance through NFIP. During a government shutdown, the NFIP (administered by FEMA) cannot sell new or renewal insurance policies. If the National Flood Insurance Program isn’t renewed, buyers purchasing in flood zones can’t close without a valid policy.
Social Security number checks. Sometimes, Social Security numbers must be verified. Lenders use federal databases to confirm identity. If access pauses, so does your file.
Who’s most at risk: Buyers whose closing date is imminent, especially if they’re using FHA, VA, USDA, or buying in a flood zone.
Conventional borrowers are safer, but not immune.
How to Protect Your Closing
If you’re under contract now:
Ask your lender if they’ve already pulled IRS transcripts. If not, request they do it immediately.
Confirm how your loan type is affected. Some lenders can “close and fund” with temporary certifications, others can’t.
Check your contract timelines. If you’re tight on deadlines, consider adding a clause allowing delays due to a government lapse.
If you’re days away from closing, accelerate if possible.
If you’re early in the process, account for delays but don’t fret. Most shutdowns only last a few days – though some have stretched for weeks.
If you’re still shopping:
Be cautious making an offer with an aggressive closing date during shutdown risk.
Consider locking in rate + timeline contingency language. Ask your builder sales team how they’ve handled shutdowns before.
Bottom line: “Plan, but don’t panic,” says Neal. If you’re nearing the closing process, move faster where you can, and build buffer where you can’t.
